June 18, 1999

Olympia- The Liquor Control Board assisted the State in recouping $1.3 million in loss revenues from cigarette tax evasion.

Since enforcement of tobacco tax was turned over to the Liquor Control Board in 1997, the Board has confiscated 841,699 packs of cigarettes. The sale of 605,360 packs generated $824,000. The wholesalers who bought the cigarettes at auction paid an additional $499,422 in cigarette taxes.

Proceeds from the sale of the cigarettes goes to the State General Fund while the 82.5 cent cigarette tax ($8.25 per carton) is divided among four separate funds:

     1. Health Care: 41 cents
     2. Programs to stop youth violence: 10.5 cents
     3. Water Quality: 8 cents
     4. General Fund: 23 Cents.

Individuals who evade the cigarette tax deprive the state's citizens of the benefits of these programs.

The Liquor Control Board has seen some positive effects in the past two years of enforcing the cigarette tax laws.

• Several smoke shops have raised prices and imposed purchase limitations, attributing their actions to increased enforcement.

• Some licensed retailers have reported increased sales of cigarettes in areas adjacent to both military and Native American reservations, where enforcement and awareness efforts have taken place.

• Several smoke shops are now buying tax paid stamped and exempt stamped cigarettes under the allotment process administered by the Department of Revenue. (They previously did not participate in the program.)

• Several wholesalers are reporting sales of tax paid cigarettes to new retailers, who previously sold untaxed cigarettes.

The Board has also taken possession of three vehicles (a station wagon, one pickup, and a semi tractor) and two trailers following civil forfeiture proceedings. The vehicles, valued at $42,000, were used to transport untaxed cigarettes into Washington. (State law provides for forfeiture of vehicles used to transport contraband cigarettes.) The potential for forfeiting large commercial vehicles has altered the delivery system for many organizations requiring higher costs of doing business. Rather than bringing cigarettes in by the trailer load, many suppliers of contraband cigarettes are now using smaller vehicles making multiple trips.

In addition, $652,477 in penalties have been assessed against individuals who were in possession of untaxed cigarettes. State law provides for the imposition of a penalty of $10 per pack or $250, whichever is greater, against individuals possessing contraband cigarettes.

Four purchaser enforcement operations conducted since last December resulted in agents issuing 17 criminal citations and seizing 100 cartons and 6 packs of cigarettes. The operations were limited to two hours in each location (two on each side of the state). Local police department vehicles were used to make the stops and Board agents issued the criminal citations and took the cigarettes as evidence for the criminal cases. Individual penalties were assessed by the local courts and ranged from $50 to $250, plus forfeiture of the contraband cigarettes.

While these positive effects are difficult to measure in financial terms, they do show a higher compliance rate. The Board continues to raise awareness of the cigarette tax laws and how the evasion of the cigarette tax impacts all citizens.

For more information please contact Tricia Currier at (360) 664-1784 or page at (360) 290-3683. You may also contact Gigi Zenk at (360) 664-1774 or page at (360) 534-8098.

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